Schroders’ private markets arm has completed a tokenisation pilot to improve the way insurance-linked securities (ILS) investments are managed and invested.

According to Schroders, the initiative successfully enabled reinsurance contracts to be tokenised and traded on a public blockchain platform using smart contracts.

Each token represents a share in a portfolio of reinsurance contracts, demonstrating how ILS funds may invest via a digital eco-system in the future.

The project was the result of more than a year of collaboration between Schroders, Hannover Re and the i.AM Innovation Lab, under the oversight of the Guernsey Financial Services Commission.

Schroders said the pilot demonstrated the potential for several benefits, such as allowing many time-consuming processes, such as subscriptions, to be automated.

It also gave the example of payments to appropriate recipients being automatically triggered if specific natural disasters occur, as a result of the integration of key catastrophe insurance data sources into the smart contracts.

“The success of this pilot showcases the immense potential for enhancing transparency, streamlining investment processes and improving client experience in the reinsurance sector,” said Stephan Ruoff, co-head of private debt and credit alternatives at Schroders Capital.

“It paves the way for a more interconnected and efficient digital ecosystem, and we are looking forward to exploring the broader application to wider investment scenarios and clients,” he added.

In a statement, Schroders Capital also said the pilot “further builds on Schroders Group’s commitment to innovation and leadership in digital assets, after having last year joined the Monetary Authority of Singapore’s Project Guardian, and participating in the first ever GBP Digital Bond issued by the European Investment Bank”.

Schroders Capital’s ILS team forms part of the private market arm’s private debt and credit alternatives business. Earlier this year Schroders said its ILS team was managing over $5bn in funds.

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